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There may be trouble ahead…

It looks like charities are facing some immense challenges over the next few years. Commentators like Adrian Sargeant are predicting a £2 billion hole in charity income due to recommendations in the Etherington review, which is proposing changes on how charities can use donor data for fundraising.

But that’s not where the trouble stops. Let’s face it, the charity market is pretty crowded, with new charities popping up all the time. There are some 160,000 registered charitable organisations in the UK alone all vying for a relatively small pool of regular givers. Not that this makes challenging as it is. That pool of donors also gets targeted by the big fundraising events like Red Nose Day and Children in Need. For a bunch of nice people wanting to do good – competition is fierce.

In this crowded marketplace (after all, that is what it is) something will have to give. Will the bigger charities ‘eat up’ the smaller ones, similar to take-overs in the commercial world? Or will the smaller ones survive better as they appeal better to the next generation who prefer more direct engagement? After all, due to the scale of operations larger charities tend to keep their supporter relationship at arm’s-length.

I suspect that size will not determine the survival chances of charities. People usually give to causes that are close to their hearts and that reflect their own, personal values in life. Which is why smaller, local charities (for example Sobell House) will continue to do well because of the local support they can tap into. As do those dealing with animal wellfare (Hearing Dogs for the Deaf). And, due to peopel’s personal experiences, health charities tend to benefit from generous donations (Cancer Research). Though some people also look at the bigger picture and like to support international development projects (Oxfam).

You could say that there is a charity for everybody. But… if you take a look a the list I mention above, and then google their specialist causes, you’ll find that for each one of them there are several charities doing pretty much the same thing or something similar. And that’s where things might get interesting. With increased competition for a dwindling pool of donors, will some of the weaker ones end up failing, as businesses would in the commercial world?

Talking about weaker charities failing , the last thing the charity sector needed was the collapse of Kids Company. It’s failure has revealed a sever lack of transparancy, accountability and professional management by some charities, adding another blow to donor confidence. It turns out that nearly a third of charities accounts filed with the Charity Commission are of ‘unacceptable quality’. With a tightening up of accounts requirements, this will probably mean Kids Company wont be the last failed charity we’ll be hearing about.

Not that there is a lack of other challenges to add to the list of challenges. Local government funding cuts could be a ‘silent killer’ for some small charities and leave them unable to compete with national organisations (though I’ll argue that people do like to support local causes). And then there are proposals to tighten up the definition of a charity shop, as well as new laws to tackle terrorism funding via charities, all of which is pretty confusing stuff, and confusing donors as to which charities are actually trustworthy and which aren’t. The result: a holding back on donations.

I could go on sounding a few more alarm bells. But there comes a point where it’s good to do a bit of a reality check.

Looking forward, I believe that all is possible. There are plenty of challenges ahead, but the best strategy is to face up to them. The focus will need to be on ‘upping the game’, to think smarter, and work on more integrated communications. This is the moment to make a big shift in how charities operate. Not-for-profits really need to start operating and thinking like businesses in the commercial world. Now surely is the time to rethink the sector’s communication strategy, and to invest in better marketing and donor recruitment.

Are you ready to face the music and dance?

If you would like to have a no-obligation talk about your organisation’s fundraising communications, you should give us a call on 0797 6012 820.